More on small and medium-sized entities (SMEs)

The IASB has published A Staff Overview of the exposure draft of the proposed IFRS for Small and Medium-sized Entities. The overview is intended as a high level introduction to the proposals set out in the following documents: Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities; Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities - Basis for Conclusions; Exposure Draft of a Proposed IFRS for Small and Medium-sized Entities - Draft Implementation Guidance - Illustrative Financial Statements and Disclosure Checklist. For complete project information on SMEs, visit the IASB website.

IFRSs In Your Pocket

In April 2007, Deloitte published the sixth edition of IFRSs In Your Pocket. The 100-page guide includes information about: IASB structure and contact details; use of IFRS around the world, including updates on Europe, Asia, USA and Canada; summaries of each IASB Standard (through IFRS 8 and the amendment to IAS 23) and Interpretation (through IFRIC 12), as well as the Framework and the Preface to IFRS; background and tentative decisions on all current IASB projects; IASC and IASB chronology; update on IFRS-US GAAP convergence; and other useful IASB-related information.

SEC Announces Next Steps Relating to IFRS

The United States Securities and Exchange Commission has announced a series of actions it intends to take relating to the acceptance of financial reporting in International Financial Reporting Standards (IFRS) as published by the International Accounting Standards Board (IASB). The proposals would give foreign private issuers a choice between IFRS and U.S. GAAP. The Press Release is available online.

IOSCO 32nd Annual Conference

The world’s securities and futures regulators have concluded their meeting in Mumbai, India which took place from April 9-12, 2007 on the occasion of the 32nd Annual Conference of the International Organization of Securities Commissions (IOSCO). The Final Communiqué, available on the IOSCO website, states that the need to progress toward internationally recognized financial reporting standards has been a central issue in the global financial services markets for some time. IOSCO has consistently focused on convergence, implementation and application, through the building of an IOSCO Database that will facilitate the sharing by securities regulators of decisions relating to the enforcement of IFRS.

FEI addresses financial reporting complexity

The Financial Executives International (FEI) notes that the complexity and technical demands of accounting and disclosure standards have increased considerably in recent years. It believes complexity harms the ability of users of financial statements to understand the information provided and impairs the ability of preparers to explain their financial results in a meaningful way. Investors are not well served by the drain on shareholder wealth from the excessively complex compliance process. The capital markets are not well served when scarce financial resources are not used in value-enhancing business initiatives but to satisfy disclosure and accounting requirements that fail to meet cost-benefit tests. The FEI’s Four Point Plan recommends steps to address complexity, including a call for all stakeholders in the financial reporting process to come together to form an independent “Committee on Complexity.”

CESR Consultation Paper on GAAP equivalence

The Committee of European Securities Regulators (CESR) has published a Press Release and Consultation Paper on the mechanism for determining the equivalence of the generally accepted accounting principles of third countries. The Prospectus Directive and Regulation (“the prospectus regime”) and the Transparency Directive will require the European Commission to establish by mid 2008 whether a given third country GAAP is equivalent to IFRS.

Patricia O'Malley named as IFRIC Co-ordinator

Patricia O'Malley completes her term as a member of the IASB on June 30, 2007. Effective July 2007, she will become the IFRIC Co-ordinator which is the senior staff person for the International Financial Reporting Interpretations Committee (IFRIC). IFRIC's role is to “interpret the application of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) and provide timely guidance on financial reporting issues not specifically addressed in IAS and IFRS, in the context of the IASB Framework.” Ms O'Malley is a former chair of the Canadian Accounting Standards Board and member of Canada’s Emerging Issues Committee.

Survey of Reported Canadian/US GAAP Differences

The Canadian Accounting Standards Board staff has published a study on Reported Canadian/US GAAP Differences. The study analyzes reported Canadian/US GAAP differences in a survey of 150 public Canadian companies for fiscal years ending in 2005. All of the companies selected for this study have listings on major US stock exchanges or issue debt securities in the US.

Canada’s IFRS convergence strategy

Canada’s Accounting Standards Board staff has prepared a presentation on migrating to IFRS. It provides a broad overview of matters to be aware of regarding Canada’s convergence with International Financial Reporting Standards for publicly accountable enterprises. The presentation “Adopting International Financial Reporting Standards in Canada” is available in audio format and slides.

UK views on convergence costs

According to the UK Financial Services Authority, the so-called “roadmap” for the Securities and Exchange Commission (SEC) to determine that IFRS are equivalent to US GAAP could potentially lead to a more transparent and lower cost global capital market in which investors are better informed and companies can access sources of capital more cheaply. However, across all stakeholder groups in the UK (preparers, auditors, investors and regulators) there is growing concern that the costs of convergence may outweigh the benefits being sought. For details, read the FSA publication Financial Risk Outlook 2007 (particularly Section F).